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Employee Health Care Savings and Benefits Accounts

As an important part of your benefits strategy, health benefits accounts such as flexible spending account (FSA), health savings account (HSA), or a health reimbursement arrangement (HRA) can help you attract employees, reduce your tax bill, and control healthcare costs, especially in combination with a high-deductible plan.

What You Get With Employee Health Care Spending and Benefits Accounts?

Health benefit plans allow employers and employees to set aside funds pretax to help employees pay for qualified medical expenses. Included with employee health care spending and benefits accounts:

  • Tax savings for employers and/or employees 
  • Unused contributions may be carried over to future years for an HSA and at the employer’s discretion for an HRA 
  • Tax-free distributions/claims for qualified medical expenses
  • Tax-free interest and earnings from account assets (HSA only) 
  • Certain benefits may be transferred between employers 
  • Support from Paychex benefit specialists

Benefit Account Options

Flexible Spending Account (FSA)

An FSA allows employers and employees to pretax money to pay for qualified out-of-pocket healthcare costs.

Dependent Care Flexible Spending Account

A dependent care FSA allows your employees to set aside pretax dollars to pay for dependent child day care or elder care expenses.

Health Savings Account (HSA)

Similar to an FSA, an HSA allows your business and employees to set aside pretax money to pay for qualified health expenses. An HSA may also earn tax-free interest.

Health Reimbursement Arrangement (HRA)

An HRA is funded by employers to help their employees pay for qualified medical expenses that their health plan doesn’t cover.

Simplify Employee Health Care with Spending Accounts

Provide Access to HRA, HSA, and FSA Specialists

Simply call our toll-free support line and our Paychex specialists can help you set up and manage your FSA, HSA, or HRA benefits.

Help Employees Save on Taxes

FSAs and HSAs can help employees save an average of 30% in federal, state, and local taxes on out-of-pocket premiums and an average of $115 per participant in FICA payroll taxes.1

Reduce Your Tax Liability with Health Benefit Accounts Administration

FICA and FUTA taxes can be reduced with benefits such as HSA, FSA, since contributions are made before taxes are taken out. This could effectively reduce an employee’s taxable income.

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Frequently Asked Questions

  • What is a health savings account (HSA)?

    What is a health savings account (HSA)?

    When paired with a qualified high-deductible health plan (HDHP), an HSA is an employer-provided elective benefit that helps employees save on taxes by setting aside tax-advantaged medical savings to use on copays, deductibles, and other qualified medical expenses.

  • Who is an HSA for?

    Who is an HSA for?

    An HSA can help healthy employees with infrequent medical needs and who receive medical care for predictable, annual checkups. Employees who are covered by Medicare are not eligible to contribute to an HSA.

  • Who owns the HSA account?

    Who owns the HSA account?

    An HSA is owned by the individual employee. Even after that person resigns, retires, or is terminated the account follows them.

  • What expenses are coved by an HSA?

    What expenses are coved by an HSA?

    Qualified medical expenses covered by an HSA include most medical care, including dental, vision, and IRS-eligible over-the-counter drugs.Some qualified expenses include:

    • Office visit copays
    • Health insurance deductibles
    • Dental expenses (tooth extraction, fillings, etc.)
    • Vision care (eye exams and eyeglasses)
    • Prescription drugs and insulin
    • Medicare premiums
    • A portion of the premiums for tax-qualified, long-term care insurance policy
    • Hearing aids
    • Imaging (X-rays, MRIs)
    • Wheelchairs, walkers, and crutches

    A detailed list of covered medical and dental expense can be found on the IRS Publication 502.

  • What is a flexible spending account (FSA)?

    What is a flexible spending account (FSA)?

    An FSA is an employer-established plan that pays for qualified medical expenses with pretax dollars contributed by employers and/or employees, prior to federal withholding, FICA tax, or state withholding taxes (in most states) being applied to the amount deducted from the employees pay.

  • Who is an FSA for?

    Who is an FSA for?

    A medical FSA is designed for employees who wish to pay for out-of-pocket medical care expense with pre-tax funds. The full amount of a medical FSA is available to employees immediately allowing them to use on medical expenses early in the plan year. FSAs cannot be used to pay Medicare premiums.

  • Who owns the FSA account?

    Who owns the FSA account?

    FSA accounts are owned by the employer. If an employee is terminated or is no longer eligible to participate in the FSA, unreimbursed contributions may be forfeited.

  • What expenses are covered by an FSA?

    What expenses are covered by an FSA?

    Except for Medicare premiums, FSAs cover many of the same qualified medical and dental expenses as an HSA. Review IRS Publication 502 for a detailed list of what is and isn’t covered. 

  • What is a health reimbursement arrangement (HRA)?

    What is a health reimbursement arrangement (HRA)?

    An HRA is an entirely employer-funded program that supplements health insurance benefits and pays for a range of medical expenses not covered by insurance.

  • Who is an HRA for?

    Who is an HRA for?

    An HRA can benefit all employees. In addition to reimbursing Medicare premiums, HRA funds can be used by employees to cover medical expenses for their spouses and dependents.

  • What is a QSEHRA?

    What is a QSEHRA?

    A qualified small-employer health reimbursement arrangement generally allows employers with fewer than 50 employees that do not offer those employees a health plan to make contributions to cover some employee health care expenses, such as health insurance premiums and coinsurance. Those employees must maintain minimum essential coverage, including an individual Marketplace plan.

  • Who owns the HRA account?

    Who owns the HRA account?

    HRAs are owned and entirely funded by the employer.

  • What expenses are covered by an HRA?

    What expenses are covered by an HRA?

    Only qualified medical expenses are reimbursable by an HRA. If used for a qualified medical expense, these reimbursements may be tax-free. View a full list of qualifying expenses here.

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